Advise ABC Pty Ltd and Liberty Pty Ltd on the tax implications of the following arrangement. a. ABC Pty Ltd owns a country property bought as a potential factory site on which there is a considerable amount of gravel. At the start of the current income year, ABC granted to Liberty Pty Ltd the exclusive right for five years to excavate and remove gravel from the land in return for payments calculated as follows: i. a minimum payment by Liberty of $5,000 per month regardless of whether or not any gravel is removed during that particular month; ii. subject to para (a), payment each month by Liberty of 50 cents per cubic metre of gravel removed in that month; and iii. provided that if it is found at the end of any year that the total volume of gravel removed in that year did not exceed 48,000 m3, then ABC will refund to Liberty any amount in excess of $50,000 paid by Liberty in that year under the terms of the agreement mentioned in para (a).
Advise ABC Pty Ltd and Liberty Pty Ltd on the tax implications of the following arrangement.
a. ABC Pty Ltd owns a country property bought as a potential factory site on which
there is a considerable amount of gravel. At the start of the current income year,
ABC granted to Liberty Pty Ltd the exclusive right for five years to excavate and
remove gravel from the land in return for payments calculated as follows:
i. a minimum payment by Liberty of $5,000 per month regardless of whether
or not any gravel is removed during that particular month;
ii. subject to para (a), payment each month by Liberty of 50 cents per cubic
metre of gravel removed in that month; and
iii. provided that if it is found at the end of any year that the total volume of
gravel removed in that year did not exceed 48,000 m3, then ABC will refund
to Liberty any amount in excess of $50,000 paid by Liberty in that year under
the terms of the agreement mentioned in para (a).
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